Changing Consumption Habits will drive OTT Innovation

TV is evolving and the way consumers watch it is changing. 2015, ‘the year of OTT,’ according to research conducted by Parks Associates, has seen more than 65 players offering or about to offer video services globally. Around 1.6 billion subscribers are actively watching online video. This growing trend is set to continue into 2016 with revenues predicted to top $263 billion by the end of the year.

In parallel to this growth is the growing demand for connected TV devices. According to Strategy Analytics, 53 million connected TV devices shipped worldwide, and that’s just in Q3 of 2015. Consumers have had their appetites whet for OTT content and they are hungry for more.

Unexpectedly though we are not seeing widespread cord cutting that was predicted. The opposite is, in fact, true according to TDG, with only 5.7% of adult broadband users likely to cancel their service.

So what’s the reason? Why, with so many OTT services to choose from, would consumers still pay for their basic TV subscriptions? It seems that, consumers are electing not to limit themselves to one service or provider, but instead mixing different services to suit their own personal tastes.

During 2016, we will see a number of established pay TV operators and broadcasters launching OTT services. With a broader range of content available across several consumer devices, it will further build brand loyalty for those providers and make cord-cutting all the less likely. Of course, pay TV operators are in a unique position, with strong customer awareness and billing relationships in local markets. A mix of studio and local content will help them engage more closely with their audiences and mean that those services will become a good additional service for the modern consumers.

There is also a growing appetite for niche content, designed as a bolt-on to go along side the main channels or other services. For example, the recently launched SeeSo service from NBCUniversal, which provides consumers with a vast ad-free catalogue of comedy entertainment. With consumers having multiple subscriptions there will be knock-on effects for the industry. Significantly we will see more and more players launching OTT services which will increase consumption. If consumers were just taking out one subscription you could argue that the market was saturated but with multiple subscriptions, the way is paved for more providers. More providers equal more competition which in turn drives prices down.

In addition, some traditional operators and virtual MVPDs are now offering lower-cost skinny bundles that boil down pay TV subscriptions to must-have channels. This in turn creates budget for consumers to augment their pay TV service with additional subscriptions that fit their specific interests such as must see original content from a premium service provider, or niche content services.

With a choice of content and companies all vying for consumer attention, the consumer is in the driving seat, and the consumer is already savvy. We are starting to see the emergence of a new buying habit where consumers take out subscriptions to get through the winter or to watch a particular show, and then dropping the subscription when it no longer suits their needs.